Economic risk analysis of alternative farming systems for smallholder farmers in central and north-east Thailand

Abstract

Purpose– The purpose of this paper is to investigate farmers’ risk aversion using the equally likely certainty equivalent approach and the negative exponential utility function to identify risk preference classification.Design/methodology/approach– Stochastic efficiency with respect to a function is applied to determine the risk efficient farming systems for the farmers in central and north-east regions of Thailand.Findings– The study results showed that maize followed by sorghum is the most risk efficient farming system for the extremely risk averse rain-fed farmers in the central region of Thailand. Intensive planting of wet rice and dry rice cultivation is preferred by the extremely risk averse central region irrigated farmers. Wet rice and cassava together with raising small herd of cattle is the most economically viable farming system for the extremely risk averse rain-fed farmers in the north-east region, while two rice crops with raising cattle is preferred by the extremely risk averse north-east irrigated farmers of Thailand.Originality/value– The findings of this study provide useful information to reinforce the empirical basis for risk analysis for Thai farmers. The results will provide more accurate information regarding risk at the farm level to policy makers and researchers.